Financial institutions in 2023 are facing growing risks to their deposit books and investment portfolios. And at the root of their problems are rising interest rates, driven by central banks’ efforts to curb inflation.
Over the past year alone, the U.S. Federal Reserve has raised its funds rate by 500 basis points and counting. Many think that interest rates are nearing their peak. But a year ago, many thought inflation was transitory.
With higher rates looking like they’re here to stay, credit unions must now reeducate themselves on how to manage their exposure to interest rate risk. But we live in unpredictable times – and the more uncertainties you face, the more certainty you need from risk management.
When anything can happen, it’s critical to know how every possible scenario could affect the balance sheet in the future – and that your firm could take the hit. So, in the wake of recent financial institutions closures and takeovers, new approaches to both managing current risks and testing the effects of further stresses will be key to the survival and growth of credit unions.
Read more here from FIS, a California and Nevada Credit Union Leagues business partner.